Global mining house and commodities trader Glencore has revealed it is making steady progress on its debt reduction measures which it first announced to the market in September this year.
Based on spot prices, the company says it has more than $2 billion of free cash flow and will remain comfortably free cash flow positive at materially lower price levels. Its estimated 2016 EBITDA (based on current prices is $7.7 billion.
“[Our] current liquidity has increased to more than $14 billion and will be further enhanced as the debt reduction plan measures are delivered,” the company says, “and debt reduction/capital preservation measures have increased to $13 billion (previous target of $10.2 billion) with $8.7 billion already achieved/locked-in.”
Glencore is also targeting a new net debt target of $18-19 billion by the end of 2016 has (previous target of low $20s billion).
Its industrial asset cash positioning has been significantly enhanced with a further reduction in capex of $5.7 billion for 2015 (expected) and $3.8 billion in 2016 (expected), down from $6 billion and $5 billion respectively.
“In September, we announced a number of measures to reduce our debt. Today we show significant delivery on those commitments, with $8.7 billion achieved to date, and are able to announce an increase in our net debt reduction target measures by almost $3 billion to $13 billion. Glencore is well placed to continue to be cash generative in the current environment – and at even lower prices. We retain a high degree of flexibility and will continue to review the need to act further as required,” says Ivan Glasenberg, Glencore CEO.
Marketing remains a unique, low risk defensive earnings driver
Despite significantly lower commodity prices, marketing adjusted EBIT for 2015 (expected) is $2.5 billion; which is underpinned by continued strength in oil and stronger contributions from agriculture and metals during the second half.
Its 2016 (expected) marketing EBIT guidance of $2.4 – 2.7 billion will reflect lower working capital levels and reduced copper, zinc, lead and coal volumes.